Art Investment Funds Update: ABN Amro Scales Back Plans

Last year, as the art market continued to surge ahead, several investment groups announced plans for art investment funds. However, following initial talk of ambitious investment and capital-raising goals, actual details of fundraising, acquisitions or investment activity have yet to materialize. Now at least one fund has scaled back sharply on its previous plan.

NEW YORK—Last year, as the art market continued to surge ahead, several investment groups announced plans for art investment funds. However, following initial talk of ambitious investment and capital-raising goals, actual details of fundraising, acquisitions or investment activity have yet to materialize. Now at least one fund has scaled back sharply on its previous plan.

In September 2004, the Dutch financial services company ABN Amro announced its intent to create an “umbrella” art investment fund, one that would invest in a number of other art funds. Recently the bank decided to abandon the plan, basing its decision on the lack of active funds currently in existence. ABN Amro had “thought there was going to be hundreds of millions of dollars going into these art investment funds” and consequently had been tracking the progress of 22 such funds around the world, reports Spencer Ewen, managing director of Seymour Management, a firm based in London that ABN Amro hired to evaluate these funds.

Ariel Salama, ABN Amro’s managing director of the art investment fund and global head of private banking, left the firm in late August as part of what a bank spokesperson termed “a major restructuring.”

Ewen expresses concern about some of the start-up funds, suggesting that “the people offering these funds were not professional money people, lacking expertise in both art and money management.” In many instances, he told ARTnewsletter, they were “people from the art world who wanted to step out and do something different,” although some had partnered with financial backers.

The other major player currently in this investment category, Fernwood Art Investments, New York, reports having had a private offering of its art fund earlier this month. Says chairman Bruce Taub: “People are lined up ready to invest.” However, no money has been deposited as yet, and the fund has not listed any investors.

Philip Hoffman, a former deputy managing director of Christie’s and now director of the Fine Art Fund, London, launched in February 2003, claims there has been substantial investor interest to date. Hoffman says the first fund has recently been capped and a second one will be opened in early 2006.

Hoffman declines to specify the actual number of investors in the first fund, the number of artworks bought and sold to date, or the total amount raised. He says, however, that investors, who hail from 15 countries, are contributing a minimum of $250,000 each, with one putting in as much as $8 million. The Fine Art Fund currently has 21 full- and part-time employees—some administering the fund, others “buying and vetting artworks all the time,” Hoffman notes.

Meanwhile, Fernwood has expanded its operations, hiring six more full-time fund administrators since the beginning of the year, which brings the total up to 18 (not including consultants with art or financial expertise), and renting more office space in Manhattan’s gallery-rich 57th Street Fuller Building.

Like the Fine Art Fund, Fernwood has aimed to attract high-end investors with at least $5 million in investable assets, contributing a ground-floor level of $250,000/500,000—the money to be pooled to purchase artwork in eight separate categories (Old European masters, 18th- and 19th-century European masters, Impressionism, American art, modern art, contemporary masters dating from 1945-69, postmodern art and emerging artists).